Self-Regulatory Organizations; American Stock Exchange LLC; Order Granting Approval of a Proposed Rule Change, as Modified by Amendment Nos. 1 and 2 Thereto, Related to Amendments to Rule 991 (Communications to Customers) and Rule 921 (Opening of Accounts), 69683-69685 [E8-27420]

Download as PDF
Federal Register / Vol. 73, No. 224 / Wednesday, November 19, 2008 / Notices
cprice-sewell on PROD1PC64 with NOTICES
resulting in a total cost of compliance
for these respondents of $42,480 per
year (144 hours @ $295).
In addition, approximately 1,500
broker-dealers must comply with Rule
9b–1. Each of these respondents will
process an average of three new
customers for options each week and,
therefore, will have to furnish
approximately 156 ODDs per year. The
postal mailing or electronic delivery of
the ODD takes respondents no more
than 30 seconds to complete for an
annual compliance burden for each of
these respondents of 78 minutes, or 1.3
hours. Thus, the total compliance
burden per year is 1,950 hours (1,500
broker-dealers × 1.3 hours). The
estimated cost for a general clerk of a
broker-dealer is $40 per hour,2 resulting
in a total cost of compliance for these
respondents of $78,000 per year (1,950
hours @ $40).
The total compliance burden for all
respondents under this rule (both
options markets and broker-dealers) is
2,094 hours per year (144 + 1,950), and
total compliance costs of $120,480
($42,480 + $78,000).
Written comments are invited on: (a)
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information shall have practical utility;
(b) the accuracy of the Commission’s
estimates of the burden of the proposed
collection of information; (c) ways to
enhance the quality, utility, and clarity
of the information to be collected; and
(d) ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted in
writing within 60 days of this
publication.
Comments should be directed to
Lewis W. Walker, Acting Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Shirley
Martinson, 6432 General Green Way,
Alexandria, VA 22312 or send an e-mail
to: PRA_Mailbox@sec.gov.
Dated: November 12, 2008.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–27430 Filed 11–18–08; 8:45 am]
2 The $40/hour figure for a general clerk is from
SIFMA’s Office Salaries in the Securities Industry
2007, modified by Commission staff to account for
an 1800-hour work-year and multiplied by 2.92 to
account for bonuses, firm size, employee benefits
and overhead. The staff believes that the ODD
would be mailed or electronically delivered to
customers by a general clerk of the broker-dealer or
some other equivalent position.
November 10, 2008.
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BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Public Law 94–409, that
the Securities and Exchange
Commission will hold its second
Roundtable on Mark-to-Market
Accounting on Friday, November 21,
2008 beginning at 9:30 a.m.
The Roundtable will take place in the
Auditorium of the Commission’s
headquarters at 100 F Street, NE.,
Washington DC. The Roundtable will be
open to the public with seating on a
first-come, first-served basis. Doors will
open at 9 a.m. Visitors will be subject
to security checks.
The roundtable will consist of an
open discussion on potential
improvements to the current accounting
model and implications of possible
changes. The roundtable will be
organized as a panel consisting of
investors, issuers, auditors and other
parties with experience in mark-tomarket accounting.
For further information, please
contact the Office of the Secretary at
(202) 551–5400.
Dated: November 14, 2008.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–27557 Filed 11–18–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58923; File No. SR–Amex–
2008–51]
Self-Regulatory Organizations;
American Stock Exchange LLC; Order
Granting Approval of a Proposed Rule
Change, as Modified by Amendment
Nos. 1 and 2 Thereto, Related to
Amendments to Rule 991
(Communications to Customers) and
Rule 921 (Opening of Accounts)
On June 25, 2008, the American Stock
Exchange LLC (‘‘Amex’’ or the
‘‘Exchange’’) 1 filed with the Securities
1 On September 29, 2008, the Commission
approved the merger of The Amex Membership
Corporation, Amex’s parent, with NYSE Euronext.
PO 00000
Frm 00085
Fmt 4703
Sfmt 4703
69683
and Exchange Commission
(‘‘Commission’’) a proposed rule change
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Exchange Act’’) 2 and Rule 19b–4
thereunder.3 Amex filed Amendment
Nos. 1 and 2 to the proposed rule
change on August 22, 2008, and
September 5, 2008, respectively.4 Notice
of the proposal was published for
comment in the Federal Register on
September 30, 2008.5 The Commission
received no comments on the proposed
rule change. This order approves the
proposed rule change, as modified by
Amendment Nos. 1 and 2.
I. Description of the Proposed Rule
Change
The Exchange proposed to amend
Amex Rule 991 (‘‘Communications to
Customers’’) to delete references to
certain provisions of the Securities Act
of 1933 (the ‘‘Securities Act’’) that no
longer apply to standardized options 6
issued by registered clearing agencies
and update and reorganize the rule for
greater clarity. In addition, the proposal
seeks to amend Amex Rule 921
(‘‘Opening of Account’’) in connection
with the information member
organizations must obtain from
customers.
A. Rule 991 (Communications to
Customers)
On December 23, 2002, the
Commission published final rules that
exempt standardized options issued by
registered clearing agencies and traded
on a registered national securities
exchange or registered national
securities association from the
Securities Act (other than the anti-fraud
provisions) and the registration
requirements of the Exchange Act.7
See Securities Exchange Act Release No. 58673
(September 29, 2008), 73 FR 57707 (October 3,
2008) (SR–NYSE–2008–60 and SR–Amex 2008–62)
(approving the Merger). As a result, Amex was
renamed NYSE Alternext US LLC. For the purposes
of this order, we will still refer to Amex.
2 15 U.S.C. 78s(b)(1).
3 17 CFR 240.19b–4.
4 Amendment Nos. 1 and 2 modified certain
definitions in and made non-substantive corrections
to proposed Rule 991.
5 See Securities Exchange Act Release No. 58625
(Sept. 23, 2008), 73 FR 56869 (Sept. 30, 2008).
6 ‘‘Standardized Option’’ is defined in Rule 19b–
1 under the Exchange Act to mean options contracts
trading on a registered national securities exchange,
an automated quotation system of a registered
national securities association, or a foreign
exchange which relate to options classes the terms
of which are limited to specific expiration dates and
exercise prices, or such other securities as the
Commission may, by order, designate.
7 See ‘‘Exemption for Standardized Options From
Provisions of the Securities Act of 1933 and From
the Registration Requirements of the Securities
E:\FR\FM\19NON1.SGM
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19NON1
69684
Federal Register / Vol. 73, No. 224 / Wednesday, November 19, 2008 / Notices
Since the Securities Act and the rules
thereunder (other than the anti-fraud
provisions) are no longer applicable to
such standardized options, Amex
proposed to remove elements of the
Securities Act that are embedded in
Amex Rule 991. In particular, the
Exchange proposed to remove all
references to a ‘‘prospectus’’ from Rule
991. Prospectuses are no longer required
for standardized options, and The
Options Clearing Corporation (‘‘OCC’’)
has, in fact, ceased publication of a
prospectus.8 In addition, the proposed
amendments would update and
reorganize Rule 991. The Commission
has approved proposed rule
amendments implementing similar rule
language and format changes by the
Financial Industry Regulatory
Authority, Inc. and the Chicago Board
Options Exchange.9
1. Deletion of Certain Provisions of Rule
991
cprice-sewell on PROD1PC64 with NOTICES
Amex Rule 991 contains a number of
references to a prospectus and other
Securities Act requirements. The
Exchange proposed to delete the
following from Rule 991:
• Rule 991(a)(iv), which references
the Securities Act prospectus definition;
• Rule 991(d), which incorporates
Securities Act principles in that it
prohibits written material concerning
options (i.e., an offering) from being
furnished to any person who has not
previously or contemporaneously
received the current ODD;
• Rule 991(e)(ii), which defines the
term ‘‘Educational Material;’’ 10
• Commentary .02A to Rule 991,
which outlines what is permitted in an
‘‘Advertisement;’’ 11 and
• Commentary .03 to Rule 991, which
concerns educational material.12
Exchange Act of 1934; Final Rule,’’ Securities Act
Release No. 8171 and Securities Exchange Act
Release No. 47082 (Dec. 23, 2002), 68 FR 188 (Jan.
2, 2003).
8 The options disclosure document (the ‘‘ODD’’)
prepared in accordance with Rule 9b–1 under the
Exchange Act is not deemed to be a prospectus. 17
CFR 230.135b. See, e.g., Securities Act Release No.
8049 (Dec. 21, 2001), 67 FR 228 (Jan. 2, 2002).
9 See Exchange Act Release No. 58738 (Oct. 6,
2008), 73 FR 60371 (Oct. 10, 2008) (SR–FINRA–
2008–13) (approval order) and Exchange Act
Release No. 58823 (Oct. 21, 2008), 73 FR 63747
(Oct. 27, 2008) (SR–CBOE–2007–30) (approval
order).
10 This paragraph essentially incorporates
language of Rule 134a under the Securities Act.
While this amendment would eliminate the
separate educational material category, as discussed
below, the Exchange also proposed to revise the
definition of Sales Literature to include educational
material.
11 This paragraph essentially incorporates
language of Rule 134 under the Securities Act.
12 See note 9, supra.
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15:14 Nov 18, 2008
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2. Re-designation of Rule 991(a) to
Proposed Rule 991(d) and Related
Amendments
Amex Rule 991(a) currently provides
an outline of the ‘‘General Rule’’ for
options communications. The Exchange
proposed to re-designate paragraph (a)
as paragraph (d), and to incorporate
limitations on the use of options
communications contained in current
Commentary .01 to Rule 991 into
proposed Rule 991(d). In addition,
proposed Rule 991(d)(iii) would amend
Rule 991(a)(iii) by clarifying the types of
cautionary statements and caveats that
are prohibited. As previously noted, the
Amex proposed to delete Rule
991(a)(iv).
3. Proposed Amendments to Rule 991(b)
Amex proposed to amend Rule 991(b)
to include the types of communications
proposed to be added to the definition
of ‘‘Options Communications’’ in
proposed Rule 991(a). Proposed Rule
991(b)(ii) and (b)(iii) would also amend
the current requirement to obtain
advanced approval by a Registered
Options Principal (‘‘ROP’’) for most
options communications by exempting
certain options communications,
defined as ‘‘Correspondence’’ and
‘‘Institutional Sales Material.’’
Specifically, proposed Rule 991(b)(ii)
would exempt Correspondence from the
pre-approval requirement unless the
Correspondence is distributed to 25 or
more existing retail customers within
any 30 calendar day period, and makes
any financial or investment
recommendation or otherwise promotes
a product or service of the member. All
correspondence would be subject to the
supervision and review requirements of
Rule 922. Proposed Rule 991(b)(iii)
would exempt Institutional Sales
Material from the pre-approval
requirement if the material is
distributed to ‘‘qualified investors’’ as
defined in Section 3(a)(54) of the
Exchange Act.13
Pre-approval by a ROP would,
however, be required with respect to
independently prepared reprints. In
addition, proposed Rule 991(b)(iv)
would require that firms retain options
communications in accordance with the
recordkeeping requirements of Rule
17a–4 under the Exchange Act.14 The
proposed rule would also require that
13 See
15 U.S.C. 78c(a)(54).
CFR 240.17a–4. More specifically, Rule 17a–
4(b)(4) requires that a broker-dealer retain ‘‘originals
of all communications received and copies of all
communications sent * * * including all
communications which are subject to rules of a selfregulatory organization of which the member,
broker or dealer is a member regarding
communications with the public.’’
14 17
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Frm 00086
Fmt 4703
Sfmt 4703
firms retain other related documents in
the form and for the time periods
required for options communications by
Rule 17a–4.
4. Proposed Amendments to Rule 991(c)
Amex Rule 991(c) currently requires
members and member organizations to
obtain from the Exchange approval for
every advertisement and all educational
material. This requirement applies
regardless of whether the options
communications are used before or after
delivery of a current ODD. The
Exchange proposed to amend this
provision to require approval by the
Exchange only with respect to
communications used prior to the
delivery of a current ODD. The
Exchange’s pre-approval requirement
for options communications used
subsequent to the delivery of the ODD
would be eliminated because the ODD
should help alert the customer to the
characteristics and risks associated with
trading in options and because Rule
991(b) requires the ROP of a member
organization to pre-approve options
communications, subject to exceptions
for ‘‘Correspondence’’ and ‘‘Institutional
Sales Material.’’ Rule 991(c) would also
be amended to include the types of
communications added to the definition
of ‘‘Options Communications’’ in
proposed Rule 991(a).
5. Re-Designation of Rule 991(e) as
Proposed Rule 991(a) and Related
Amendments
Rule 991(e) currently defines the
terms used in Rule 991. Amex proposed
to re-designate paragraph (e) as
paragraph (a). The Exchange also
proposed to amend the definition of
‘‘Options Communications’’ in proposed
Rule 991(a) to expand the types of
communications governed by Rule 991
to include independently prepared
reprints and other communications
between a member or member
organization and a customer. The
Exchange proposed to amend the
definitions of ‘‘Advertisement’’ and
‘‘Sales Literature;’’ and define
‘‘Correspondence,’’ ‘‘Institutional Sales
Material,’’ ‘‘Public Appearances’’ and
‘‘Independently Prepared Reprints’’ to
clarify the rule. In addition, as
previously noted, Amex proposed to
delete the definition of ‘‘Educational
Material.’’
6. Proposed Rule 991(e)
Proposed Rule 991(e) would set forth
(i) standards for options
communications that are not preceded
or accompanied by an ODD and (ii)
standards for options communications
used prior to delivery of an ODD. These
E:\FR\FM\19NON1.SGM
19NON1
Federal Register / Vol. 73, No. 224 / Wednesday, November 19, 2008 / Notices
cprice-sewell on PROD1PC64 with NOTICES
requirements generally clarify and
restate the requirements contained in
current Commentary .02 to Rule 991.
7. Related Commentaries
Proposed Rule 991(e)(i)(B) would
require options communications to
contain contact information for
obtaining a copy of the ODD. Proposed
Commentary .01 to Rule 991 would
include the provisions found in current
Commentary .02A to Rule 991 regarding
how this requirement may be satisfied.
In addition, as noted above, the
provisions of current Commentary .01 to
Rule 991 regarding limitations on the
use of options communications would
be incorporated into proposed Rule
991(d).
As previously noted, the provisions of
current Commentary .02 to Rule 991
that outline what is permitted in an
advertisement would be deleted, and
the provisions relating to standards for
options communications used prior to
delivery of the ODD would be
incorporated into proposed Rule
991(e)(ii).
Current Commentary .03 to Rule 991
regarding educational materials also
would be deleted, as noted above.
Current Commentary .04 to Rule 991
sets forth the standards applicable to
Sales Literature. Current Commentary
.04A sets forth the requirement that
Sales Literature shall state that
supporting documentation for any
claims, comparisons, recommendations,
statistics or other technical data will be
supplied upon request. The Exchange
proposed to re-designate current
Commentary .04A as proposed Rule
991(d)(vii).
Current Commentary .04B to Rule 991
relates to standards for Sales Literature
that contain projected performance
figures. Current Commentary .04C
relates to standards for Sales Literature
that contains historical performance
figures. The Exchange proposed to redesignate current Commentary .04B as
proposed Commentary .02 to Rule 991
and current Commentary .04C as
proposed Commentary .03 to Rule 991.
Rule 991 currently requires that a
copy of the ODD precede or accompany
options related sales literature. The
Exchange proposed to modify the ODD
delivery requirement applicable to sales
literature to provide that an ODD must
precede or accompany any
communication that conveys past or
projected performance figures involving
options or constitutes a
recommendation pertaining to
options.15
15 See proposed Rule 991(e)(i)(C) and proposed
Commentaries .02 and .03 to Rule 991.
VerDate Aug<31>2005
15:14 Nov 18, 2008
Jkt 217001
A notice providing the name and
address of a person from whom the ODD
may be obtained would be required in
sales literature that does not contain a
recommendation of past or projected
performance figures. Because Amex is
proposing to merge educational material
into the sales literature category,16 this
amendment would continue to allow
communications that are educational in
nature to be disseminated without being
preceded or accompanied by a copy of
the ODD.
The Exchange proposed to redesignate current Commentary .04D to
Rule 991 as proposed Commentary .04
to Rule 991. The Exchange proposed to
delete current Commentaries .04E, F
and G to Rule 991. The Exchange
believes Commentaries .04E and F are
unnecessary because worksheets are
included in the definition of Sales
Literature. In addition, the Exchange
believes Commentary .04G is no longer
necessary because the Exchange is
proposing to clarify the recordkeeping
requirements applicable to options
communications in proposed Rule
991(b)(iv).
B. Rule 921 (Opening of Accounts)
The proposal would also amend Rule
921 in connection with the opening of
options accounts. Currently,
Commentary .01 to Rule 921 requires a
member organization to obtain certain
information about its options customers
in order to comply with the due
diligence requirement in opening a new
account under Rule 921(c). In order to
conform to the requirements of Rule
17a–3(a)(17) under the Exchange Act,
the proposed amendments would
require that in addition to all the
essential information to determine
suitability, a member organization must
also obtain the customer’s name, Tax
Identification Number, address, and
telephone number.
II. Comments
As noted above, the Commission
received no comments on the proposed
rule change.
III. Discussion and Findings
After careful review of the proposed
rule change, the Commission finds that
the proposed rule change is consistent
with Section 6 of the Act,17 in general,
and furthers the objectives of Section
6(b)(5),18 in particular, in that it is
designed to prevent fraudulent and
16 See
proposed Rule 991(a)(ii).
U.S.C. 78f(b). In approving this proposal, the
Commission has considered the impact of the
proposed rule change on efficiency, competition
and capital formation. See 15 U.S.C. 78c(f).
18 15 U.S.C. 78f(b)(5).
17 15
PO 00000
Frm 00087
Fmt 4703
Sfmt 4703
69685
manipulative acts and practices, to
promote just and equitable principles of
trade and to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities.
The Commission also finds that,
consistent with Section 6(b)(5) of the
Act,19 the proposed rule change is
designed to remove impediments to and
perfect the mechanisms of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest, by
providing the investing public with
options communications rules that are
designed to provide appropriate
safeguards and greater clarity by
promoting harmonization between the
Amex and other SRO options
communications rules and conforming
Rule 921 to the requirements of Rule
17a–3(a)(17) under the Exchange Act.20
The Commission believes that the
proposal is consistent with Section
6(b)(5) of the Act 21 because the
proposed amendments to Amex Rule
991 reflect amendments to the
Securities Act that generally exempt
standardized options, and will update
and reorganize the Rule.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Exchange Act,
that the proposed rule change (SR–
Amex–2008–51), as modified by
Amendment Nos. 1 and 2, be, and
hereby is, approved.22
For the Commission by the Division of
Trading and Markets, pursuant to delegated
authority.23
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–27420 Filed 11–18–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58927; File No. SR–BSE–
2008–48]
Self-Regulatory Organizations; Boston
Stock Exchange, Incorporated; Notice
of Filing of Proposed Rule Change To
Establish New Rules for Membership,
Member Conduct, and the Listing and
Trading of Cash Equity Securities
November 10, 2008.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
19 Id.
20 17
CFR 240.17a–3(a)(17).
U.S.C. 78f(b)(5).
22 15 U.S.C. 78s(b)(2).
23 17 CFR 200.30–3(a)(12).
21 15
E:\FR\FM\19NON1.SGM
19NON1

Agencies

[Federal Register Volume 73, Number 224 (Wednesday, November 19, 2008)]
[Notices]
[Pages 69683-69685]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-27420]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58923; File No. SR-Amex-2008-51]
Self-Regulatory Organizations; American Stock Exchange LLC; Order
Granting Approval of a Proposed Rule Change, as Modified by Amendment
Nos. 1 and 2 Thereto, Related to Amendments to Rule 991 (Communications
to Customers) and Rule 921 (Opening of Accounts)
November 10, 2008.
On June 25, 2008, the American Stock Exchange LLC (``Amex'' or the
``Exchange'') \1\ filed with the Securities and Exchange Commission
(``Commission'') a proposed rule change pursuant to Section 19(b)(1) of
the Securities Exchange Act of 1934 (the ``Exchange Act'') \2\ and Rule
19b-4 thereunder.\3\ Amex filed Amendment Nos. 1 and 2 to the proposed
rule change on August 22, 2008, and September 5, 2008, respectively.\4\
Notice of the proposal was published for comment in the Federal
Register on September 30, 2008.\5\ The Commission received no comments
on the proposed rule change. This order approves the proposed rule
change, as modified by Amendment Nos. 1 and 2.
---------------------------------------------------------------------------
\1\ On September 29, 2008, the Commission approved the merger of
The Amex Membership Corporation, Amex's parent, with NYSE Euronext.
See Securities Exchange Act Release No. 58673 (September 29, 2008),
73 FR 57707 (October 3, 2008) (SR-NYSE-2008-60 and SR-Amex 2008-62)
(approving the Merger). As a result, Amex was renamed NYSE Alternext
US LLC. For the purposes of this order, we will still refer to Amex.
\2\ 15 U.S.C. 78s(b)(1).
\3\ 17 CFR 240.19b-4.
\4\ Amendment Nos. 1 and 2 modified certain definitions in and
made non-substantive corrections to proposed Rule 991.
\5\ See Securities Exchange Act Release No. 58625 (Sept. 23,
2008), 73 FR 56869 (Sept. 30, 2008).
---------------------------------------------------------------------------
I. Description of the Proposed Rule Change
The Exchange proposed to amend Amex Rule 991 (``Communications to
Customers'') to delete references to certain provisions of the
Securities Act of 1933 (the ``Securities Act'') that no longer apply to
standardized options \6\ issued by registered clearing agencies and
update and reorganize the rule for greater clarity. In addition, the
proposal seeks to amend Amex Rule 921 (``Opening of Account'') in
connection with the information member organizations must obtain from
customers.
---------------------------------------------------------------------------
\6\ ``Standardized Option'' is defined in Rule 19b-1 under the
Exchange Act to mean options contracts trading on a registered
national securities exchange, an automated quotation system of a
registered national securities association, or a foreign exchange
which relate to options classes the terms of which are limited to
specific expiration dates and exercise prices, or such other
securities as the Commission may, by order, designate.
---------------------------------------------------------------------------
A. Rule 991 (Communications to Customers)
On December 23, 2002, the Commission published final rules that
exempt standardized options issued by registered clearing agencies and
traded on a registered national securities exchange or registered
national securities association from the Securities Act (other than the
anti-fraud provisions) and the registration requirements of the
Exchange Act.\7\
[[Page 69684]]
Since the Securities Act and the rules thereunder (other than the anti-
fraud provisions) are no longer applicable to such standardized
options, Amex proposed to remove elements of the Securities Act that
are embedded in Amex Rule 991. In particular, the Exchange proposed to
remove all references to a ``prospectus'' from Rule 991. Prospectuses
are no longer required for standardized options, and The Options
Clearing Corporation (``OCC'') has, in fact, ceased publication of a
prospectus.\8\ In addition, the proposed amendments would update and
reorganize Rule 991. The Commission has approved proposed rule
amendments implementing similar rule language and format changes by the
Financial Industry Regulatory Authority, Inc. and the Chicago Board
Options Exchange.\9\
---------------------------------------------------------------------------
\7\ See ``Exemption for Standardized Options From Provisions of
the Securities Act of 1933 and From the Registration Requirements of
the Securities Exchange Act of 1934; Final Rule,'' Securities Act
Release No. 8171 and Securities Exchange Act Release No. 47082 (Dec.
23, 2002), 68 FR 188 (Jan. 2, 2003).
\8\ The options disclosure document (the ``ODD'') prepared in
accordance with Rule 9b-1 under the Exchange Act is not deemed to be
a prospectus. 17 CFR 230.135b. See, e.g., Securities Act Release No.
8049 (Dec. 21, 2001), 67 FR 228 (Jan. 2, 2002).
\9\ See Exchange Act Release No. 58738 (Oct. 6, 2008), 73 FR
60371 (Oct. 10, 2008) (SR-FINRA-2008-13) (approval order) and
Exchange Act Release No. 58823 (Oct. 21, 2008), 73 FR 63747 (Oct.
27, 2008) (SR-CBOE-2007-30) (approval order).
---------------------------------------------------------------------------
1. Deletion of Certain Provisions of Rule 991
Amex Rule 991 contains a number of references to a prospectus and
other Securities Act requirements. The Exchange proposed to delete the
following from Rule 991:
Rule 991(a)(iv), which references the Securities Act
prospectus definition;
Rule 991(d), which incorporates Securities Act principles
in that it prohibits written material concerning options (i.e., an
offering) from being furnished to any person who has not previously or
contemporaneously received the current ODD;
Rule 991(e)(ii), which defines the term ``Educational
Material;'' \10\
---------------------------------------------------------------------------
\10\ This paragraph essentially incorporates language of Rule
134a under the Securities Act. While this amendment would eliminate
the separate educational material category, as discussed below, the
Exchange also proposed to revise the definition of Sales Literature
to include educational material.
---------------------------------------------------------------------------
Commentary .02A to Rule 991, which outlines what is
permitted in an ``Advertisement;'' \11\ and
---------------------------------------------------------------------------
\11\ This paragraph essentially incorporates language of Rule
134 under the Securities Act.
---------------------------------------------------------------------------
Commentary .03 to Rule 991, which concerns educational
material.\12\
---------------------------------------------------------------------------
\12\ See note 9, supra.
---------------------------------------------------------------------------
2. Re-designation of Rule 991(a) to Proposed Rule 991(d) and Related
Amendments
Amex Rule 991(a) currently provides an outline of the ``General
Rule'' for options communications. The Exchange proposed to re-
designate paragraph (a) as paragraph (d), and to incorporate
limitations on the use of options communications contained in current
Commentary .01 to Rule 991 into proposed Rule 991(d). In addition,
proposed Rule 991(d)(iii) would amend Rule 991(a)(iii) by clarifying
the types of cautionary statements and caveats that are prohibited. As
previously noted, the Amex proposed to delete Rule 991(a)(iv).
3. Proposed Amendments to Rule 991(b)
Amex proposed to amend Rule 991(b) to include the types of
communications proposed to be added to the definition of ``Options
Communications'' in proposed Rule 991(a). Proposed Rule 991(b)(ii) and
(b)(iii) would also amend the current requirement to obtain advanced
approval by a Registered Options Principal (``ROP'') for most options
communications by exempting certain options communications, defined as
``Correspondence'' and ``Institutional Sales Material.'' Specifically,
proposed Rule 991(b)(ii) would exempt Correspondence from the pre-
approval requirement unless the Correspondence is distributed to 25 or
more existing retail customers within any 30 calendar day period, and
makes any financial or investment recommendation or otherwise promotes
a product or service of the member. All correspondence would be subject
to the supervision and review requirements of Rule 922. Proposed Rule
991(b)(iii) would exempt Institutional Sales Material from the pre-
approval requirement if the material is distributed to ``qualified
investors'' as defined in Section 3(a)(54) of the Exchange Act.\13\
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\13\ See 15 U.S.C. 78c(a)(54).
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Pre-approval by a ROP would, however, be required with respect to
independently prepared reprints. In addition, proposed Rule 991(b)(iv)
would require that firms retain options communications in accordance
with the recordkeeping requirements of Rule 17a-4 under the Exchange
Act.\14\ The proposed rule would also require that firms retain other
related documents in the form and for the time periods required for
options communications by Rule 17a-4.
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\14\ 17 CFR 240.17a-4. More specifically, Rule 17a-4(b)(4)
requires that a broker-dealer retain ``originals of all
communications received and copies of all communications sent * * *
including all communications which are subject to rules of a self-
regulatory organization of which the member, broker or dealer is a
member regarding communications with the public.''
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4. Proposed Amendments to Rule 991(c)
Amex Rule 991(c) currently requires members and member
organizations to obtain from the Exchange approval for every
advertisement and all educational material. This requirement applies
regardless of whether the options communications are used before or
after delivery of a current ODD. The Exchange proposed to amend this
provision to require approval by the Exchange only with respect to
communications used prior to the delivery of a current ODD. The
Exchange's pre-approval requirement for options communications used
subsequent to the delivery of the ODD would be eliminated because the
ODD should help alert the customer to the characteristics and risks
associated with trading in options and because Rule 991(b) requires the
ROP of a member organization to pre-approve options communications,
subject to exceptions for ``Correspondence'' and ``Institutional Sales
Material.'' Rule 991(c) would also be amended to include the types of
communications added to the definition of ``Options Communications'' in
proposed Rule 991(a).
5. Re-Designation of Rule 991(e) as Proposed Rule 991(a) and Related
Amendments
Rule 991(e) currently defines the terms used in Rule 991. Amex
proposed to re-designate paragraph (e) as paragraph (a). The Exchange
also proposed to amend the definition of ``Options Communications'' in
proposed Rule 991(a) to expand the types of communications governed by
Rule 991 to include independently prepared reprints and other
communications between a member or member organization and a customer.
The Exchange proposed to amend the definitions of ``Advertisement'' and
``Sales Literature;'' and define ``Correspondence,'' ``Institutional
Sales Material,'' ``Public Appearances'' and ``Independently Prepared
Reprints'' to clarify the rule. In addition, as previously noted, Amex
proposed to delete the definition of ``Educational Material.''
6. Proposed Rule 991(e)
Proposed Rule 991(e) would set forth (i) standards for options
communications that are not preceded or accompanied by an ODD and (ii)
standards for options communications used prior to delivery of an ODD.
These
[[Page 69685]]
requirements generally clarify and restate the requirements contained
in current Commentary .02 to Rule 991.
7. Related Commentaries
Proposed Rule 991(e)(i)(B) would require options communications to
contain contact information for obtaining a copy of the ODD. Proposed
Commentary .01 to Rule 991 would include the provisions found in
current Commentary .02A to Rule 991 regarding how this requirement may
be satisfied. In addition, as noted above, the provisions of current
Commentary .01 to Rule 991 regarding limitations on the use of options
communications would be incorporated into proposed Rule 991(d).
As previously noted, the provisions of current Commentary .02 to
Rule 991 that outline what is permitted in an advertisement would be
deleted, and the provisions relating to standards for options
communications used prior to delivery of the ODD would be incorporated
into proposed Rule 991(e)(ii).
Current Commentary .03 to Rule 991 regarding educational materials
also would be deleted, as noted above.
Current Commentary .04 to Rule 991 sets forth the standards
applicable to Sales Literature. Current Commentary .04A sets forth the
requirement that Sales Literature shall state that supporting
documentation for any claims, comparisons, recommendations, statistics
or other technical data will be supplied upon request. The Exchange
proposed to re-designate current Commentary .04A as proposed Rule
991(d)(vii).
Current Commentary .04B to Rule 991 relates to standards for Sales
Literature that contain projected performance figures. Current
Commentary .04C relates to standards for Sales Literature that contains
historical performance figures. The Exchange proposed to re-designate
current Commentary .04B as proposed Commentary .02 to Rule 991 and
current Commentary .04C as proposed Commentary .03 to Rule 991.
Rule 991 currently requires that a copy of the ODD precede or
accompany options related sales literature. The Exchange proposed to
modify the ODD delivery requirement applicable to sales literature to
provide that an ODD must precede or accompany any communication that
conveys past or projected performance figures involving options or
constitutes a recommendation pertaining to options.\15\
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\15\ See proposed Rule 991(e)(i)(C) and proposed Commentaries
.02 and .03 to Rule 991.
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A notice providing the name and address of a person from whom the
ODD may be obtained would be required in sales literature that does not
contain a recommendation of past or projected performance figures.
Because Amex is proposing to merge educational material into the sales
literature category,\16\ this amendment would continue to allow
communications that are educational in nature to be disseminated
without being preceded or accompanied by a copy of the ODD.
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\16\ See proposed Rule 991(a)(ii).
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The Exchange proposed to re-designate current Commentary .04D to
Rule 991 as proposed Commentary .04 to Rule 991. The Exchange proposed
to delete current Commentaries .04E, F and G to Rule 991. The Exchange
believes Commentaries .04E and F are unnecessary because worksheets are
included in the definition of Sales Literature. In addition, the
Exchange believes Commentary .04G is no longer necessary because the
Exchange is proposing to clarify the recordkeeping requirements
applicable to options communications in proposed Rule 991(b)(iv).
B. Rule 921 (Opening of Accounts)
The proposal would also amend Rule 921 in connection with the
opening of options accounts. Currently, Commentary .01 to Rule 921
requires a member organization to obtain certain information about its
options customers in order to comply with the due diligence requirement
in opening a new account under Rule 921(c). In order to conform to the
requirements of Rule 17a-3(a)(17) under the Exchange Act, the proposed
amendments would require that in addition to all the essential
information to determine suitability, a member organization must also
obtain the customer's name, Tax Identification Number, address, and
telephone number.
II. Comments
As noted above, the Commission received no comments on the proposed
rule change.
III. Discussion and Findings
After careful review of the proposed rule change, the Commission
finds that the proposed rule change is consistent with Section 6 of the
Act,\17\ in general, and furthers the objectives of Section
6(b)(5),\18\ in particular, in that it is designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade and to foster cooperation and
coordination with persons engaged in facilitating transactions in
securities. The Commission also finds that, consistent with Section
6(b)(5) of the Act,\19\ the proposed rule change is designed to remove
impediments to and perfect the mechanisms of a free and open market and
a national market system, and, in general, to protect investors and the
public interest, by providing the investing public with options
communications rules that are designed to provide appropriate
safeguards and greater clarity by promoting harmonization between the
Amex and other SRO options communications rules and conforming Rule 921
to the requirements of Rule 17a-3(a)(17) under the Exchange Act.\20\
The Commission believes that the proposal is consistent with Section
6(b)(5) of the Act \21\ because the proposed amendments to Amex Rule
991 reflect amendments to the Securities Act that generally exempt
standardized options, and will update and reorganize the Rule.
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\17\ 15 U.S.C. 78f(b). In approving this proposal, the
Commission has considered the impact of the proposed rule change on
efficiency, competition and capital formation. See 15 U.S.C. 78c(f).
\18\ 15 U.S.C. 78f(b)(5).
\19\ Id.
\20\ 17 CFR 240.17a-3(a)(17).
\21\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Exchange Act, that the proposed rule change (SR-Amex-2008-51), as
modified by Amendment Nos. 1 and 2, be, and hereby is, approved.\22\
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\22\ 15 U.S.C. 78s(b)(2).
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-27420 Filed 11-18-08; 8:45 am]
BILLING CODE 8011-01-P